The Eurozone Grapples with the Prospects of Deflation

Inflation reigned from 1933 to 2008.

Since 2008, the global economic trend has been in transition. World economies appear to be pivoting from a psychology of expansion to conservatism.

Here's an excerpt from a January 8 Wall Street Journal article:

Inflation rates across the world's largest economies eased for the sixth straight month in November as energy prices fell sharply, a decline that is likely to continue over coming months.

The European Union looks to be "ground zero" for this historic economic shift.

The BBC reports (Jan. 7) that "Deflation hits eurozone as energy prices fall."

Inflation in the eurozone has turned negative, official figures have shown, with prices in December 0.2% lower than the same month a year earlier.

The tip into deflation adds pressure on the European Central Bank (ECB) to take further action to stimulate the bloc's economy.

The bank's inflation target is below but close to 2%.

The fall was driven mainly by lower energy costs due to the plunging price of oil.

Energy prices in December were 6.3% lower than a year earlier. If energy prices are excluded, December's inflation rate for the eurozone was 0.6%, the same as in November.

Prices for food, alcohol and tobacco were estimated to be unchanged from a year earlier, after rising 0.5% in November.

Prices for services, which had held steady in November, are estimated to have risen 1.2% compared with December 2013.

It is the first time the eurozone has experienced deflation since the depths of the financial crisis in 2009.

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